Correlation Between NAIROBI BUSINESS and ABSA BANK
Can any of the company-specific risk be diversified away by investing in both NAIROBI BUSINESS and ABSA BANK at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NAIROBI BUSINESS and ABSA BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NAIROBI BUSINESS VENTURES and ABSA BANK OF, you can compare the effects of market volatilities on NAIROBI BUSINESS and ABSA BANK and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NAIROBI BUSINESS with a short position of ABSA BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAIROBI BUSINESS and ABSA BANK.
Diversification Opportunities for NAIROBI BUSINESS and ABSA BANK
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NAIROBI and ABSA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NAIROBI BUSINESS VENTURES and ABSA BANK OF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA BANK and NAIROBI BUSINESS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NAIROBI BUSINESS VENTURES are associated (or correlated) with ABSA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA BANK has no effect on the direction of NAIROBI BUSINESS i.e., NAIROBI BUSINESS and ABSA BANK go up and down completely randomly.
Pair Corralation between NAIROBI BUSINESS and ABSA BANK
Assuming the 90 days trading horizon NAIROBI BUSINESS is expected to generate 2.51 times less return on investment than ABSA BANK. In addition to that, NAIROBI BUSINESS is 3.3 times more volatile than ABSA BANK OF. It trades about 0.03 of its total potential returns per unit of risk. ABSA BANK OF is currently generating about 0.23 per unit of volatility. If you would invest 1,405 in ABSA BANK OF on August 31, 2024 and sell it today you would earn a total of 140.00 from holding ABSA BANK OF or generate 9.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NAIROBI BUSINESS VENTURES vs. ABSA BANK OF
Performance |
| Timeline |
| NAIROBI BUSINESS VENTURES |
| ABSA BANK |
NAIROBI BUSINESS and ABSA BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NAIROBI BUSINESS and ABSA BANK
The main advantage of trading using opposite NAIROBI BUSINESS and ABSA BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAIROBI BUSINESS position performs unexpectedly, ABSA BANK can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ABSA BANK will offset losses from the drop in ABSA BANK's long position.| NAIROBI BUSINESS vs. ABSA BANK OF | NAIROBI BUSINESS vs. BRITISH AMERICAN TOBACCO | NAIROBI BUSINESS vs. CO OPERATIVE BANK OF | NAIROBI BUSINESS vs. ABSA NEW GOLD |
| ABSA BANK vs. ABSA NEW GOLD | ABSA BANK vs. KENYA ORCHARDS LTD | ABSA BANK vs. NAIROBI BUSINESS VENTURES | ABSA BANK vs. KENYA RE INSURANCE PORATION |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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